Wachler & Associates Health Law Blog

On Monday March 1st, a 21% Medicare physician payment cut went into legal effect. However, the Obama administration directed Medicare billing companies to stop processing claims for 10 business days in order to provide lawmakers with extra time to create a solution. On March 2, 2010, Kathleen Sebelius, Secretary of the Department of Health and Human Services, addressed the American Medical Association (AMA) and assured members that she was committed to developing a permanent fix to the sustainable growth rate (SGR) that controls Medicare payments to physicians.

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February 2010: In November 2009, the U.S. House of Representatives passed the Medicare Physician Payment Reform Act of 2000, a bill that blocks a 21.2 percent physician-payment cut. Specifically, the bill would amend the Social Security Act to reform the Medicare Sustainable Growth Rates (SGR) payment system for physicians. The SGR was originally created in 1997 to control Medicare spending by cutting payments to doctors if costs exceeded predetermined levels. Only in 2002 did lawmakers allow payment cuts to take place. In other years, lawmakers intervened to prevent payment cuts in order to prevent doctors from leaving the Medicare program. According to the American Medical Association (AMA), if the bill fails to pass, the payment cut for physicians could grow to about 40 percent by 2016. Proponents of the bill argue that such payment cuts will cause fewer doctors to accept Medicare patients and that it is time to implement a permanent fix.

The bill was placed on the Senate Legislative Calendar on December 24^th, and read for a second time on January 20^th. There is speculation, however, as to whether the bill will be passed in the Senate. Opponents to the bill argue that it will increase the federal government’s already record-breaking budget deficit. An additional hurdle the bill must overcome is its characterization by some as part of the Administration’s effort to overhaul the healthcare system. This depiction brings the effort into controversial political territory, thus making the effort to have it passed more difficult.

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February 2010: In November 2009, the Centers for Medicare and Medicaid Services (CMS) announced changes to Medicare’s 2010 home health prospective payment system rates and modifications to the home health outlier policy. The rule became effective January 1, 2010.

In recent years, CMS has become more attuned to the growth in outlier payments, specifically very high outlier payments in certain areas of the country. An outlier payment is made for an episode that has a cost which exceeds a threshold amount. A Home Health Agency must bear a fixed dollar loss (FDL) before an episode becomes eligible for outlier payments. In 2009 CMS did not raise the FDL ratio due to the extremely high outlier payments in designated areas.

For CY 2010, CMS underwent an analysis of all providers who received outlier payments, focusing on total HH PPS payments, total outlier payments, number of episodes, number of outlier episodes, and location of provider. This analysis prompted CMS to propose an agency level outlier cap: in any given calendar year, an individual HHA will receive a maximum of 10 percent of its total HH PPS payments in outlier payments. In addition, CMS proposed to reduce the FDL ratio to .67 for CY 2010 (from .89 in CY 2009).

On February 5, 2010 the Centers for Medicare and Medicaid Services (CMS) rescinded Change Request(CR) 6375, Transmittal 1873, dated December 11, 2009. The rescinded CR contained instructions regarding place of service (POS) and date of service (DOS) for the professional component (i.e. interpretation) and technical component of diagnostic tests. The accompanying MLN Matters article, MM6375, is also rescinded. CMS intends to publish a replacement CR once there is policy clarification on these issues.

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